The growth of Electricity Demand Response programs in the United States have been concurrent with the development of “smart grid” applications , the Federal Energy Regulatory Commission (FERC) Ruling 245 (allowing demand response resources to be paid full market prices for their energy contribution) and the growth of formal capacity markets. The ability to monitor total enterprise energy consumption with smart meters in real time, combined with a general increase in electricity capacity prices, has provided a boost to the United States Demand Response market. According to FERC’s latest data, there were 28,303 Megawatts in Demand Response programs during 2012. Demand Response as defined by FERC is “Changes in electric usage by end-use customers from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized”.
The most popular form of demand response to date has been emergency capacity response where Independent System Operators have designed programs that enable customers to be paid a capacity payment for agreeing to curtail their electricity usage at times of high system demand, thereby reducing the need to build “peaking” electricity generation stations and enhance the transmission grid. Each program has somewhat different rules regarding notice, duration and quantity of usage curtailment and the compensation payments vary according to capacity prices and market demand for demand response resources. The recent increase in PJM capacity prices for the 2014-15 and 2015-16 planning periods has many commercial businesses located in the PJM control area evaluating the potential of offering their ability to curtail in exchange for monetary compensation. One other important benefit from participating in such a program is that a customer could reduce its peak demand usage thereby possibly reducing the future capacity payment a customer pays to receive electricity service. While there are many other specific issues to be discussed in regards to demand response, we do want our readers to be aware of the growth of these programs.